In the automobile insurance industry, insurers typically analyze costs and set prices by categorizing vehicles according territory, type of vehicle, declared future use of the vehicle, type of driver, declared future mileage, and past driver record. The insurer assigns a base price by type of coverage, such as liability or collision coverage, to each territory class according to the insurer's past costs in that territory. The other categories provide additions to and subtractions from the base cost of the territory insurance price.
The price of automobile insurance varies by company and by the type of coverage that is bought, how much coverage is bought, and any deductibles. Vehicle location affects insurance costs such that urban drivers generally pay more for insurance than drivers in rural areas due to higher rates of accidents and theft. Vehicle use also affects insurance rates such that people who use their vehicle for business and long-distance commuting generally pay more than those who drive less miles or less often. The type of vehicle affects insurance rates such that the more expensive the vehicle, the more the driver must pay for insurance.
A driver's age, sex, marital and financial status also affect insurance rates. Accident rates are higher for all drivers under age 25, especially young, single males. Accordingly, insurance prices are higher for these drivers. Driving records are also taken into account when setting insurance rates. Drivers who cause or have been involved in accidents, receive traffic tickets, or make insurance claims generally must pay more than those who do not have accidents, tickets, or claims on their driving record. More recently, it has become an industry standard to use a driver's credit rating to set insurance premiums as studies have shown that credit history is highly predictive of future losses. Accordingly, many insurance companies consider credit history in addition to other factors when determining an individual's insurance rate.
Currently, insurance rates are set for broad, generalized categories of drivers and vehicles, such as those discussed above, without the capability to set future insurance rates based upon the driving habits of an individual driver. U.S. Pat. Nos. 5,797,134 and 6,064,970, both entitled “Motor Vehicle Monitoring System for Determining a Cost of Insurance,” and U.S. Pat. No. 6,868,386, entitled “Monitoring System for Determining and Communicating a Cost of Insurance,” all assigned to Progressive Casualty Insurance Company (hereinafter “the Progressive Patents”) and hereby incorporated by reference herein in their entirety, disclose a system and method in which previously set insurance rates are adjusted based upon driver behavior during the term of the insurance contract. The Progressive Patents disclose a passive vehicle monitoring system that observes driver behavior and vehicle operation, but that does not provide any mentoring, warnings or feedback to the driver. In particular, the system described in the Progressive Patents do not provide any mentoring, warnings or feedback based upon the driver's behavior or operation of the vehicle.
The system described in the Progressive Patents sets an insurance rate for a specified period and then, during the period, monitors the driver. At the end of the period, based upon how the driver performed during the period, the system in the Progressive Patents provides for a possible rate adjustment for the past period. Under the Progressive Patents, a driver is given an insurance rate based upon a standard insurance rating profile. During the period of time covered by that insurance rate, the system in the Progressive Patents monitors the driver and determines if the rate for the past period was correct or if, based upon data from the vehicle monitoring system, the rate set for the past period should be corrected. As a result, the driver may receive a surcharge or a discount to a previously paid insurance premium after the coverage period has ended.
The Progressive Patents do not disclose making adjustments to insurance rates simply based upon the insured using a vehicle monitoring system. The Progressive Patents also do not disclose selecting an insurance rate for a current or future period based upon the use of a vehicle monitoring system. Instead, the system in the Progressive Patents provides vehicle operation data from a monitoring system to the insurer only for the purpose of adjusting previously charged insurance rates. The Progressive Patents do not disclose a system or method for categorizing or grading driver skill or behavior for the purpose of setting present or future insurance rates or for grouping drivers for consideration by insurance companies.